Although the pandemic has had a severe impact on China’s economy, it did not change its economic fundamentals, according to the country’s top economic regulator.
China’s economy is bouncing back to growth after a steep slump from the COVID-19 pandemic with better-than-expected indicators in the second quarter, said Yan Pengcheng, director of the Department of National Economy at the National Development and Reform Commission, during a news conference in Beijing on Friday.
“Steady economic recovery in the second quarter proves that China’s economy has great resilience to offset external headwinds such as the coronavirus outbreak. The country is able to make structural adjustments, shift the growth model and foster new growth drivers,” he said.
Yan said China’s economy will continue to recover with the gradual advancement of epidemic prevention and control and economic and social development.
China still faces a number of major economic challenges that could dampen its future growth, such as the continued global spread of the coronavirus and an unfavorable international economic and trade environment, he said.
Despite headwinds, China’s GDP grew by 3.2 percent year-on-year in the second quarter, rebounding from the first quarter’s contraction, the National Bureau of Statistics said.
Chen Yuyu, an economics professor at Peking University’s Guanghua School of Management, said the second quarter’s improved indicators signal that China is bouncing back from the downturn.
“The economy will gradually regain its swagger with government measures to continuously prevent and control the epidemic,” Chen said in an article posted on the WeChat account of his management school.”The epidemic has not affected the pace of China’s structural adjustment. Instead, China is moving forward in terms of upgrading its economic structure and renewing economic driving forces, with booming new business in fields like online education, cloud computing and smart manufacturing.”
Chen forecast that China’s GDP growth could rebound to 5 to 6 percent in the third and fourth quarters, with full-year growth of 2 to 3 percent. “More efforts are needed to spur consumption, boost domestic demand, create more jobs and introduce policies to spark innovation in technologies and business models.”
To hedge against the impact of COVID-19, the government has introduced a series of policies to maintain economic and social stability, such as increasing support for hard-hit enterprises. The country has cut taxes and fees by more than 1 trillion yuan ($142.9 billion), the NDRC said.
The NDRC said it approved 54 fixed-asset investment projects in the first half of this year, mainly in transportation, high-tech, energy, agriculture, forestry and water conservancy. The overall investment hit 494.4 billion yuan.
“In the next phase, the NDRC will continue to work with relevant parties to expand effective investment and focus on new infrastructure, new-type urbanization and key projects for national development,” Yan from the NDRC said.
In the first half of 2020, China’s fixed-asset investment declined 3.1 percent year-on-year, narrowing from a 6.3 percent decline in the first five months. In the second quarter, fixed-asset investment jumped 4.8 percent, the NBS said.
Chen from Peking University said the strong rebound in fixed-asset investment has helped drive the economic recovery. “The investment growth rate reached higher than the pre-crisis level, registering sound growth momentum.”
Investment from foreign enterprises increased by 3.9 percent in the first half of this year, proving China’s increasing openness and attractiveness to foreign investment, Chen added.
Lily Ma, managing director of China business for United States-based cloud computing software company Nutanix, said the company remains enthusiastic about China.
“The Chinese government has been very supportive since the beginning of the coronavirus outbreak, and we’ve seen China’s economy demonstrate extraordinary resilience amid the crisis.
“We also see new growth opportunities in the internet economy and the digital transformation of enterprises. We’re willing to provide solutions accordingly for Chinese clients and will continue to increase investment in China business.” Ma added.